Married couples are often seeing arguing over financial matters. This can be challenging as two different people brought up in different financial conditions would behave in different way related to money.
The only solution for this problem is to talk openly about their views on finances. Here we have shared few tips related to finance which can help newly wedded couple in shaping their financial life.
Married last November, Rahul and Ruchika were enjoying their life to the fullest. Both had a high salary paying job, big apartment in posh locality; everything was just perfect for them. Soon their honeymoon period was at halt as on one day Ruchika was thrown out of her job. Ruchika is a management graduate from IIM and did her PG by opting for education loan. She was paying it from last 2 years and was managing it out from her salary. With the sudden loss of her job now the burden of repaying the loan was on Rahul. For the first few months he was able to handle it properly but was then unable to manage it as their living expenses were high and no one was ready to compromise. Finally, Rahul decided to break his savings to pay the loan.
This is the story of many newly wedded couples who do not talk about money matters before marriage and as a result they make some investment errors or financial mistakes which can take years to fix. There are many points to discuss like who will pay the rent? Who will bear the load of EMI? How will you divide your monthly expenses? You will combine it or will keep it separate?
There is the answer to every question but people need to act early and discuss the money matter openly. So, here are few tips to make sure (as a couple) you properly manage your finances jointly or individually for lifetime.
1. Openly discuss about money matters – It is best to do this even before getting married, if not then discuss it with your spouse as soon as possible. It’s important to discuss spending habits, saving habits, liabilities, current investments and future goals.
2. Emergency Fund – These days both husband and wife earns which results in living better lifestyle. Money comes in from both sides and it looks like nothing could go wrong. However they need to understand that in case of any job loss or any unforeseen event they can end up losing everything. Putting money aside is necessary for rainy days. It will not only help in reducing stress during emergency but will also help in saving the other investment.
Tip – An Emergency fund should have 3-4 month worth of living expenses when both the spouses are working If only husband is working then the emergency fund should be for 6 months to 12 months based on specific situation.
3. Insure Yourself – No body wants to die or wants to see the hospital bed, but now that you are married and have a dependent family it is important to have sufficient life cover and health cover so that in case of any unforeseen event your family or dependent does not suffer. If earning spouse already has a life cover then cover needs to be reviewed and may be increased. The amount of the life cover depends upon the financial goals and net liabilities to be addressed in case of the eventuality. In case of health insurance both should have a floater policy or at least individual policy. The couple should look for health covers that will include maternity expenses. Even if employer is providing the health cover, couple should opt for a health cover on their own, to eliminate the dependency on the employer.
4. Create Budget and track it: - If one is saver and the other is spender, then you should create a budget which respects both. Do not worry about your differences rather you can enjoy it by reversing the role.Saver can decide about spending part and spender can suggest methods to save. Once this is done, you can start reviewing it every month to get the exact position of your spending and saving limit.
5. Review your bank accounts: Once married both partners can decide from which account to pay insurance premiums, invest every month and from which account to pay for monthly expenses. They can also keep personal expenses and investment from their individual account and can allocate a joint account towards monthly expenses and joint investments. This strategy may help in reducing stress related to regular expenses and investments.
6. Start Investing – After few month of marriage, the couple should start investing for their future needs and goals. They should sit together to discussabout their future goals, prioritise and start investing towards achieving them. If they are new towards investing they can take help of an expert who can guide them in a better way.
7. Update nomination/other details in financial instruments - Mutual Funds, Bank Account, Demat Account, Insurance Policies, Real Estate are some of the instruments which require updating nomination after you get married. Also in many cases the last name of spouse and address is changed which needs to be updated. This can be helpful to other spouse where he/she would be in a proper position to claim the ownership on these accounts in case of any unforeseen event.
8. Review your investments – Once the investment cycle is started, all you need to do is to review it regularly. You need to determine if any changes are required in the asset allocation strategy. This can be helpful in the long run in shaping your financial life.
It’s important to have a plan and prepare for any emergency when it is related to money. If both spouse work together to handle their budget, investment and spending habits then they will be in a better position to handle any unforeseen event throughout their life. Remember, if you don’t talk about money now, you will have to deal with it later but it’s always earlier the better.
The author is a Certified Financnia Planner (CFP). Currently, he is associated with GettingYouRich, a Mumbai based Financial Planning firm.